Capital Gains Tax for Shares

[Rajput1962]

Not sure if this is the right thread or not but it may help others thinking of Bed & ISA and my recent experience.

VWRL ex-divi was 17th Dec 2020, and i was trying to get a proportion of the divi 'earned' in my ISA.

So towards the end of the day i sold a load in my dealing account on 16th Dec 2020 only to then discover that i would have to wait 3 days before i could transfer the cash into my ISA. So i bought them all back half an hour later. There wasn't enough time left to do a Bed & ISA that day. I called customer services the next day on the 17th and effected a BED & ISA and the money was transferred into the ISA straightaway whereupon i bought VWRL again. I thought that because i still held the shares in the dealing a/c on both the 16th and 17th i'd get the divi one way or another. Not so.

I've had an email to say that as i (sold and) rebought on the 16th the purchase didn't settle until 3 days later - so i missed out on the rebought shares divi. As for the ISA account, same problem - the shares didn't settle until 3 days later either and so missed out again.

I had thought that owing the shares on the ex-divi date itself was fine but it seems that its the number actually held 'cleared' the day before the ex-divi date is the key date. All in all, in trying to save a bit of tax i end up losing it and a bit more. Oh, and the extra dealing charges too.

I would suggest bearing the settlement period in mind in case there's a divi due. The next VWRL (and some other Vanguard ETFs) ex-divi date is 18th March 2021 which is getting towards tax year end when folk might be thinking about gains/losses etc.

I don't know what happens if the one sells immediately just before end of tax year and it settles inside the new tax year for where any gain/loss is booked.

[doug2500]

Good warning Rajput.

Given that you actually did own the shares for at least part of every relevant day I wonder who did get the dividend? The market makers would be my guess but I'm not sure.

[PinkDalek]

... I don't know what happens if the one sells immediately just before end of tax year and it settles inside the new tax year for where any gain/loss is booked.

Not sure if that is a CGT related question but, in most cases involving the disposal of quoted securities, the date of disposal is the date of the sale (which'll be shown on the contract note). The settlement date doesn't change that date.

[PinkDalek]

The disposal price I put down on my computation for Greggs is the mid-price at close but I noticed the adj. price next to it when I checked it on Yahoo yesterday and it aroused my curiosity.

https://finance.yahoo.com/quote/GRG.L/h ... Close=true ...

If it is of any comfort, that page shows Close* 2,074.00.

That 2,074.00 for Dec 12, 2019 is matched here https://www.sharesmagazine.co.uk/shares/share/GRG/historic-prices?startDate=12-12-2019&endDate=12-12-2019&submitbtn=Filter (where AJ Bell do not play around with Adj Close**).

Bbfn
PD

[Bouleversee]

The post I submitted in response to that of Rajput's around the same time as Pink Dalek's seems to have disappeared into the ether. What the heck happens to them? I didn't see any notification saying there had been previous posts before mine that I might wish to read before submitting.

I asked who the OP's broker/platform was because I don't understand why he would not get the dividend if he bought the shares on the day before they went x-dividend. What is all this about time for the shares to settle? And if you ask your broker to bed and isa a holding, isn't it normally done simultaneously to avoid a change in the share price. Where does waiting to settle come into it? The whole point of doing it that way is that you are using the money of the sold shares to buy the new ones in the ISA. It's different if you do it yourself. You have to have enough money in your account to cover the purchase. It's 2 separate deals. I can see you wouldn't get the div. on the B&I shares as they were already x-d but I'm assuming you had enough other money left in your non-ISA account when you bought them back the day before or otherwise you wouldn't have been able to do the deal so I should have thought you would qualify for the dividend on those. There's something that doesn't sound right here.

I nearly had a similar experience this week when I wanted to transfer some certificated shares into my ISA to avoid tax on a large special dividend but found it would have taken 5 days, assuming it didn't get held up in the post, and the broker had published the wrong x-d date so I abandoned the project. It's a mistake to leave these things till the last minute.

It sounds as though Pink Dalek agrees with me that if you bought the shares and still held them the day before the x-d date you should get the dividend. OTOH this is what I was told (not by my broker) earlier this week: "The Board is proposing to pay the Special Dividend to Shareholders on the Register as at 6.00 p.m. (GMT) on 12 February 2021 in Pounds Sterling and to ADR holders on the ADR register as at 5.00 p.m. (New York time) on 12 February 2021 (being the close of business on the day before the ADR effective date for the Share Consolidation) in US dollars. The XD date is always the day before the register date, so that must be Thursday 11." That still leaves the question of how long it takes to get onto the register and whether you get the dividend if you buy the day before the x-div. date regardless of when it gets onto the register. Maybe it's an automatic process that happens two days after purchase without fail. I am no expert, however, so perhaps PD or another superior Lemon could clarify.

[Rajput1962]

I posted my message in this thread in case anyone (like me!) is trying to do a share buy/sell to realise gains/losses and there's some date thing that says that the gain/loss is not bookable until 3 days later and perhaps end up in the next tax year. Or get caught out if the buy/sell is close to an ex-divi date whilst trying to do a CGT related 'optimisation'.

The actual email i received from Equiniti (previously Selftrade) is as follows:

"Good afternoon,

Thank you for your recent message,

Please be aware that the Ex-dividend date of the 17th is correct for Vanguard FTSE All-World UCITS ETF as outlined in the link below:

https://www.vanguardinvestor.co.uk/inve ... tributions

As you purchased the stock on the 17th in your ISA. The stock settled in your ISA on the 21st December 2020. Unfortunately, with the stock settling in your account after the 17th you have not been allocate any distributions for this stock.

This will also be the same for the stock you purchased on the 16th with a settlement date of the 18th December. Securities will only pay distributions on stocks which have been settled and not on trade dates.

All settlement dates are confirmed on your contract notes

Let us know if you need any further help,..... "

The stock referred to on the 16th is the repurchase after the sale half an hour earlier, when i discovered that i couldn't transfer the money. This first attempt was an ordinary sell, followed by a repurchase. I successfully did the B&I the next day.

[PinkDalek]

I posted my message in this thread in case anyone (like me!) is trying to do a share buy/sell to realise gains/losses and there's some date thing that says that the gain/loss is not bookable until 3 days later and perhaps end up in the next tax year. ...

My earlier reply relating to CGT, which was not in connection with ex-dividend dates, still stands.

... the date of disposal is the date of the sale (which'll be shown on the contract note). The settlement date doesn't change that date.

If you’d prefer chapter & verse from HMRC, here’s a good a place as any:

Computation: rules determining date of disposal
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14260

If the disposal is made under an unconditional contract the date of disposal is the date the contract is made. It is not the later date when the asset is conveyed or transferred to the purchaser. etc etc.

[Alaric]

Securities will only pay distributions on stocks which have been settled and not on trade dates.

Surely there's an extremely long standing rule that if you trade at a price which includes the right to the dividend that if buying you receive the dividend and if selling you forfeit it. The broker has to sort it out on the settlement date. Once upon a time settlements could take a couple of weeks.

[Bouleversee]

Alaric (or anyone)-

Two questions: (a) if you buy on the day before the x-div date and don't sell till the following day, are you normally entitled to the dividend or not? (b) If you buy on the x-div date and continue to hold, are you normally entitled to the dividend or not? I thought it was yes to (a) and no to (b). I don't think he would have been entitled to the dividend even if it had settled on the l7th.

Can a platform's Terms of Business supersede the answer to the above?

Does it make any difference whether you had sufficient cash in the buying account to cover the purchase on the purchase date?

I must check what happens with my platforms which no longer include Selftrade/Equiniti.

I hadn't realised the OP's post was regarding cgt. He is going to have fun with his return even withut end of tax year considerations. Best to avoid making any disposals near the end of the tax year.

[doug2500]

There's the record date too, although I must admit I've never been totally clear on it.

Record Date
The record date is the cut-off date used to determine which shareholders of a stock are entitled to a dividend. The record date is set by the board of directors of a corporation. Based on the record date, the board of directors can also determine who should receive stock reports and other financial information relating to the investment.1




Ex-Dividend Date
The ex-dividend date (or ex-date) of a stock is dictated by stock exchange rules and is usually set to be one business day before the record date. In order for an investor to receive a dividend payment on the listed payment date, they would need to have their stock purchase completed by the ex-dividend date. If the stock sale has not been completed by the ex-dividend date, then the seller on record is the one who receives the dividend for that stock

This is from investopedia, https://www.investopedia.com/ask/answer ... d-date.asp

[Dod101]

I posted my message in this thread in case anyone (like me!) is trying to do a share buy/sell to realise gains/losses and there's some date thing that says that the gain/loss is not bookable until 3 days later and perhaps end up in the next tax year. Or get caught out if the buy/sell is close to an ex-divi date whilst trying to do a CGT related 'optimisation'.

The actual email i received from Equiniti (previously Selftrade) is as follows:

"Good afternoon,

Thank you for your recent message,

Please be aware that the Ex-dividend date of the 17th is correct for Vanguard FTSE All-World UCITS ETF as outlined in the link below:

https://www.vanguardinvestor.co.uk/inve ... tributions

As you purchased the stock on the 17th in your ISA. The stock settled in your ISA on the 21st December 2020. Unfortunately, with the stock settling in your account after the 17th you have not been allocate any distributions for this stock.

This will also be the same for the stock you purchased on the 16th with a settlement date of the 18th December. Securities will only pay distributions on stocks which have been settled and not on trade dates.

All settlement dates are confirmed on your contract notes

Let us know if you need any further help,..... "

The stock referred to on the 16th is the repurchase after the sale half an hour earlier, when i discovered that i couldn't transfer the money. This first attempt was an ordinary sell, followed by a repurchase. I successfully did the B&I the next day.

I seldom buy or sell on the ex div date but can someone say if Equiniti is correct? Like Alaric I thought that if you bought or sold on or before the ex div date you received or forfeited the dividend otherwise what is the point in publishing an ex div date? The settlement date is outside of the investor's control. I would in fact be prepared to dispute Equiniti's assertion. An interesting and potentially important point.

Dod

[scrumpyjack]

The settlement date is irrelevant. If you had bought and held a stock as at the close of business the day before it goes xd, you are entitled to the dividend.
If settlement arrangements result in your not getting the dividend, it is the broker's duty to recover it from the market. This used to happen quite often in my youth but I thought it had all been sorted out now.

Is it possible that the contractual arrangements are different for Irish ETFs (which Vanguard are)?

[Bouleversee]

So we all thought the same, but read this from Shares Magazine:

https://www.sharesmagazine.co.uk/articl ... 20dividend.

If this is correct, we are all wrong and, as Dod said, what is the point of the x-d date?

I give up.

[Alaric]

If this is correct, we are all wrong and, as Dod said, what is the point of the x-d date?

I think some of these people have to be talking rubbish, or if they aren't there's an issue to rattle the cage of the FCA.

For example

If you bought shares on Thursday 4 May this would not settle until Monday 8 May. ‘You would not be on the share register as at the record date and therefore would not qualify for the dividend,’ explains Neil Evans, head of middle office at financial services firm Killik.

OK then what about a seller of the shares on 4th May? This implies they would receive the sale price including the dividend and also the dividend. Either that or the dividend is pocketed either by the Company or the Registrar.

"You" aren't on the share register as a named individual anyway given that the holdings are in the name of the going Broker's nominee company. The differences are going to manifest themselves when the nominee reconciles what it got from the registrar with the entitlements shown in Broker records.

[swill453]

Not sure if this is the right thread or not but it may help others thinking of Bed & ISA and my recent experience.

VWRL ex-divi was 17th Dec 2020, and i was trying to get a proportion of the divi 'earned' in my ISA.

So towards the end of the day i sold a load in my dealing account on 16th Dec 2020 only to then discover that i would have to wait 3 days before i could transfer the cash into my ISA. So i bought them all back half an hour later.

I agree that you've exposed genuine issues regarding whether you should have got the dividend or not.

But I have to say the rush to buy the shares again in your dealing account was a little pointless. After the xd date the price of the shares would have dropped by the equivalent of the dividend anyway.

Unless you were desperate to not be out of the market for an instant longer than necessary, you could have waited and picked up more shares for your money.

Scott.

[Bouleversee]

Perhaps it's the nominee who pockets the dividend. It certainly does need sorting out, but who is going to do it?

[Rajput1962]

I have some other questions that i wonder if any of you could shed some light on.

When i normally buy some shares aside from price x number, i also pay the the broker's charge for the purchase plus stamp duty at 0.5%. I know that the purchase cost, broker's fee, and stamp duty are allowable costs against any overall gain upon sale and to offset against CGT threshold.

When i buy an index fund/etf i pay the broker's fee to buy but there is no stamp duty. However, I note that there is still the fund charge taken from the fund itself by the fund manager. Is this an allowable cost against CGT?

This isn't something explicit that appears on any purchase statement but Vanguard do provide what they call an ex-ante costs statement eg

"Breakdown of Fund Management Costs

Investment | One-off | On-going | Transactional | Incidental | Total
VWRL | £0.86 | £4.43 | £0.52 | £0.00 | £5.81
| (0.04%) | (0.22%) | (0.03%) | (0.0%) | (0.29%)

Fund Management Costs – these are fees paid to the fund managers where your investments have
been made:
● One-off costs – these are costs you would pay when entering or exiting your investment. For
ETFs you will incur a Bid-Offer Spread on your trade. We estimate the spread using a rolling 30
day average per fund which may differ from your actual spread
● Ongoing costs – these are costs taken each year by the managers of your investments
● Transaction costs – these are costs incurred by the managers when buying or selling underlying
investments
● Incidental costs – this would be the impact of any performance fee

Cumulative effect of costs and charges on return
Based on these figures, over the period of one year the account and fund management costs and
charges would reduce your investment from £2,000.00 to £1,994.19. This is a reduction of £5.81. This
assumes a zero growth rate".

If not, then the next couple of sentences are irrelevant. Is it £5.81? There is also an annual ongoing charge so would i apply it for each year of holding the investment at 0.22% against the value of the holding(s) on say the last day of the tax year?

Finally, is the annual platform fee an allowable cost against CGT calcs? If so, presumably it would be the sum of all fees across all accounts? Many thanks!

.

[Alaric]

However, I note that there is still the fund charge taken from the fund itself by the fund manager. Is this an allowable cost against CGT?

Given that when you sell the units in the fund, the price you receive is after the deduction of regular charges then sort of yes, but no in that you don't include estimates of it against the CGT gain.

[Arborbridge]

If you bought shares on Thursday 4 May this would not settle until Monday 8 May. ‘You would not be on the share register as at the record date and therefore would not qualify for the dividend,’ explains Neil Evans, head of middle office at financial services firm Killik.

I'm not sure this is the correct use of the word therefore! It does not necessarily follow (therefore there is no therefore) and there is something screwy here. The XD date has to be the important date, otherwise there is no point in having such a date - or have they altered the rules without telling anyone?

When your names gets on or off the register, or when the deal is settled, is entirely a matter of the inner machinery over which we have no control. The date that the contract is struck must be the applicable date, otherwise it is nonsense. Share prices alter according to XD date, not record date.

I've had a least one deal in which the registrar (through the broker) has claimed back a dividend to which I was not entitled, so it does happen that corrections are made if the name is on the register but shouldn't be.

Arb.

[scrumpyjack]

If you bought shares on Thursday 4 May this would not settle until Monday 8 May. ‘You would not be on the share register as at the record date and therefore would not qualify for the dividend,’ explains Neil Evans, head of middle office at financial services firm Killik.

I'm not sure this is the correct use of the word therefore! It does not necessarily follow (therefore there is no therefore) and there is something screwy here. The XD date has to be the important date, otherwise there is no point in having such a date - or have they altered the rules without telling anyone?

When your names gets on or off the register, or when the deal is settled, is entirely a matter of the inner machinery over which we have no control. The date that the contract is struck must be the applicable date, otherwise it is nonsense. Share prices alter according to XD date, not record date.

I've had a least one deal in which the registrar (through the broker) has claimed back a dividend to which I was not entitled, so it does happen that corrections are made if the name is on the register but shouldn't be.

Arb.

It is certainly not correct. It may be true that you have to be the holder on the record date to receive the dividend, but if the broker or whoever did not register the change of ownership promptly that does not affect the legal entitlement to the dividend. It may be that brokers now are too lazy to chase small dividends that have not gone automatically to the shareholder who is entitled to it, but you should chase them.